Cutting the Coding Clutter: How Revamping Denial and Disenrollment Codes Can Keep People Covered and Lower Costs

By Andy Snyder
December 2012
This blog post was originally published on State Refor(u)m’s State of Implementation Blog

States typically don’t have great information on the reasons why people fall off of Medicaid, or are denied coverage in the first place. Complex, outmoded coding systems can obscure the real story behind an applicant’s denial or disenrollment. A new brief from Maximizing Enrollment authored by Mathematica Policy Research and NASHP suggests a new way to cut through the clutter in order to use denial and disenrollment data more effectively, and potentially save money on administration. As health reform rolls out, updating these systems may also help states better coordinate among Medicaid, CHIP, and health insurance exchanges.

A person’s Medicaid coverage can be denied or end for three main categories of reasons:

  • Loss or denial of eligibility due to a change in circumstances (for example, if a person has an increase in income, turns 21, moves out of state, or becomes incarcerated);
  • Failure to pay required premiums; or
  • Loss or denial of coverage for procedural reasons (because a person does not return paperwork on time or doesn’t submit needed documentation).

This third category—procedural closure—is a major contributor to a “churning” problem, where people lose Medicaid coverage for paperwork reasons, only to return a short time later. Churning off of and onto Medicaid results in added costs and administrative burden for states because enrolling individuals is generally more expensive than renewing them. (Gaps in insurance also can have negative effects on individuals’ health, including increased use of expensive hospital services.) Churn will be even more expensive for states in 2014, when there are more people eligible for public programs and coverage transitions are happening more frequently.

States that can track and understand why people are denied or lose coverage will be in a better position to implement efficient and effective enrollment and renewal systems, and adopt policies that can reduce procedural closures.

When a case is closed and a person’s Medicaid enrollment ends, a computer system or an eligibility worker assigns one or more “reason codes” to explain why. These codesets, however, often are too cluttered to allow for clear analysis. Some states have coding systems that list hundreds of possible reasons that a person’s eligibility for Medicaid can end. Each individual code may have been added for a good reason, but the sheer volume of codes, combined with complicated and confusing definitions, makes it difficult for eligibility staff to apply the codes consistently and reliably.

These complex codesets may result in workers using “catch-all” codes such as “individual no longer meets program requirements,” which can obscure the reasons why people are losing coverage. If a state can’t distinguish cases that were closed due to a change in income from those where a renewal form wasn’t returned, it is letting a valuable data source go to waste.

The new Maximizing Enrollment issue brief recommends a streamlined set of just fourteen codes that classify denials and disenrollments according to the three categories described above: change in circumstances, failure to pay premiums, and procedural reasons.

Since enhanced federal matching funds are available for states to upgrade Medicaid eligibility systems until 2015, and states have to make eligibility system changes to comply with health reform changes, now is a great time for states to design systems that use denial and disenrollment data more effectively. States can use these recommended codes to streamline their systems, make it easier for workers to accurately code cases, and make their data more intelligible, actionable, and comparable with peer states. Most importantly, these codes can help states to get a better handle on the reasons why people who are eligible for Medicaid coverage lose it, and to develop policy solutions to keep eligible individuals enrolled. In short, these codes can help states cut through the clutter and use their data to make smart decisions.

What is your state planning in regard to eligibility systems redesign in the run-up to 2014? Let us know in the eligibility systems discussion.


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